Perfect Your Knowledge and Make a Big Bet

Perfect Your Knowledge and Make a Big Bet

“And you always take with full attribution to the most fundamental ideas that you are required to use. When you’re using physics, you say you’re using physics. When you’re using biology, you say you’re using biology. And so on and so on. I could easily see that that ethos would get as a fine organizing system for my thought. And I strongly suspected that it would work very well in soft sciences as well as the hard sciences, so I just grabbed it all through my life in soft science as well as hard science. That was a lucky idea for me. Let me explain how extreme that ethos is in hard science. There is a constant, one of the fundamental constants in physics, called Boltzmann’s constant. You probably all know it very well. And the interesting thing about Boltzmann’s constant is that Boltzmann didn’t discover it. So why is Boltzmann’s constant now named for Boltzmann? Well, the answer is that Boltzmann derived that constant from basic physics in a more fundamental way than the poor forgotten fellow who found the constant in the first place in some less fundamental way. The ethos of hard science is so strong in favor of reductionism to the more fundamental body of knowledge that you can wash a discoverer right out of history when somebody else handled his discovery in a fundamental way. I think that is correct. I think Boltzmann’s constant should be named for Boltzmann. At any rate, in my history and Berkshire’s history, Berkshire went on and on into considerable economic success while ignoring the hard-form efficient morals doctrine once very popular in academic economics and ignoring the descendants of that doctrine in corporate finance where the results become even sillier than they were in economics. This naturally encouraged me.

“Finally, with my peculiar history, I’m also bold enough to be here today because at least when I was young, I wasn’t a total klutz. For one year at the Harvard Law School, I was ranked second in a very large group, and I always figured that, while there were always a lot of people much smarter than I was, I didn’t have to hang back totally in the thinking game xlv.”

They talked in the manner of old friends. Mr. Brown’s office was very dark at that moment. It was a big room, full of furniture of all kinds—office desks, cupboards, a broad red leather sofa, and paintings. On the table was tons of paper, both newspapers and books. Charlie was looking at the table, and on it were two or three books by Benjamin Graham, which were opened with some bookmarks visible. The oil paintings all around in that room created an atmosphere of smoke.

Mr. Brown: “Wall Street is a hard place to be, Charlie. You do not have the beautiful story of yours to sit and bet when you want to. You have enormous pressure from the clients. You behave how they want you to behave. You make commitments to buy some stocks. You make predictions. I feel myself close to an animal from time to time. Your beautiful stories on worldly wisdom and knowledge have nothing to do with practice. For a week or two, I did not eat, drink, or sleep. I never left this room. I was on my knees in front of the computer and watched as my stock portfolio was sinking every day with 80 percent. I thought, ‘I’ll die.’ I was looking at myself and sitting in that chair all night long. No sleep. I could not forgive myself for feeling that stupid. I think you once told a fellow, “It is dishonorable to be stupider than you have to be.

“My honor was involved. I’ve never studied anything, you know. I am not so talented myself to have the discipline to do it. But you may see I have many books in my library today. But what I want to tell you is that this is all theory. It has nothing to do with practice and business. What about you, my friend? Could I kindly ask you, Charlie, how did you incorporate these models into a legal practice when you were a lawyer? And how did it work?”

The excerpt ends before the answer to Brown’s question.